Toyota to consolidate most U.S. operations in Texas

Sales, finance, manufacturing, engineering to be housed at HQ near Dallas

LOS ANGELES -- Toyota Motor Corp. will combine and consolidate its far-flung U.S. operations into a single campus in Plano, Texas, with a targeted move-in completion date of late 2017, the automaker said today.

Following a week of rumor regarding the relocation of Toyota’s sales and marketing operations based near Los Angeles came confirmation of a much larger-scale relocation of nearly all Toyota’s North American processes and operations to the suburb north of Dallas.

The move will affect 2,000 positions at Toyota Motor Sales U.S.A., in Torrance, Calif., 1,000 employees of Toyota Financial Services, in Torrance; 1,000 employees of Toyota Motor Engineering & Manufacturing North America in Erlanger, Ky.; and some employees of Toyota Motor North America based in New York, the automaker said in a statement.

Ultimately, about 4,000 employees will be based in Plano.

The only operation that is not relocating is the Toyota Technical Center in Ann Arbor, Mich., which is in its own growth mode and will absorb the direct-procurement duties from TEMA’s Kentucky operations.

In an address to employees, Toyota North America CEO Jim Lentz said: "Currently, we’re operating as multiple affiliates in a connected-but-independent way. In other words, we still have silos, and that’s slowing our decision-making processes. Our goal is to become not a group of dedicated affiliates, but one company -- One Toyota."

Lentz added: "Many roles will transfer, unchanged, to the new locations. Some new roles will be created, while others may evolve to meet the changing needs of the new organization."

The move was announced to a small, stunned group of Toyota executives during a hastily scheduled lunchtime meeting Friday. The rest of the staff was notified Monday morning.

As part of the relocation plans, Toyota will offer all full-time employees and their spouses an expenses-paid site visit to Plano, as well as a lump-sum relocation payment should they choose to relocate, a Toyota official said.

“We’re looking at bringing together, for the first time in our 57-year history, four headquarters affiliates into one unified North American team,” said Julie Hamp, Toyota’s chief communications officer. “We believe the advantages will be better for our customers and dealers, the career development for our associates, and allow us to vastly increase our ability to compete.”

'Everyone is invited'

Although Toyota is taking an “everyone is invited” stance for the relocation, officials admitted that there likely will be some headcount attrition from employees who do not wish to move.

The automaker also will be consolidating certain overlapping functions that will now be shared between the different branches of North American operations. Although a final decision has yet to be made on which functions will be consolidated, departments under consideration include information services, human resources, legal, accounting and communications.

The move will occur in stages as Toyota’s new campus is being built, in the style of Apple’s new sprawling campus in Silicon Valley. The first moves, involving those working most closely on the company’s redesign and move details, will begin this fall. The second wave, encompassing the overlapping functions due for consolidation, will begin in December 2015. The rest of the affected Toyota Motor Sales and TEMA employees will move in early 2017, while Toyota Financial Services will move in late 2017.

Before choosing Plano, Toyota examined 10 cities in which it could have a centralized headquarters. States where Toyota had existing operations weren’t on this list, because Toyota wanted everyone to have a fresh start, a Toyota official said. In other words, California never stood a chance at keeping Toyota.

“We wanted to seek a neutral location where there wasn’t an existing affiliate, so we could build the company and culture from the ground up. If others were relocated to an existing location, then there would be winners and losers,” the official said.

Texas won out for several reasons: Zero state income tax, lower housing costs, and a relatively strong quality-of-life index. The cost of living is 39 percent lower in Plano than in Torrance. It has ranked highly in “best places” and “safest cities” ratings conducted by CNN and Forbes.

Plus, in Toyota’s favor, Forbes ranked Texas the seventh-best state for business, with the top-ranked business climate. Texas labor laws also are more favorable, with less red tape.

To coincide with the announcement, Toyota launched www.onetoyotafamily.com, which touts the benefits of living the metropolitan Dallas region and Ann Arbor, plus has frequently asked questions and answers and a "personal change guide" for employees.

When Nissan moved its 1,300 jobs to Nashville, the state of Tennessee chipped in $197 million in relocation assistance. Toyota officials confirmed that the state of Texas made a financial commitment to lure Toyota, but declined to give specifics.

One intriguing part of the move to Texas is that Toyota Motor Sales does not control distribution of its own vehicles there. That task is handled by Houston-based, Gulf States Toyota.

A Toyota official, speaking on condition of anonymity, said: “There is zero influence or impact on GST. That relationship will remain unchanged.”

The human toll

When Nissan North America relocated its U.S. headquarters to Nashville, Tenn., in 2006, the automaker claimed that 40 percent of its employees moved with the company. At the time, however, Nissan insiders said the actual number was closer to just one in four employees, and that Nissan padded its numbers by hiring post-announcement employees in California on condition they move to Nashville.

More importantly, much of Nissan’s leadership core chose to leave the company rather than uproot their families from California. Eight top senior vice presidents or vice presidents left the company at the time of the move or within 24 months of the move. Many managers took the relocation package only because they couldn’t find new work before the moving vans arrived, and left families in Los Angeles and lived in efficiency apartments in Nashville. As soon as they could find new work, they left Nissan.

What’s more, attracting talent to move to Nashville initially proved difficult for Nissan, although for a time a steady influx of frustrated Detroit executives earned Nissan the nickname “Ford South.”

Headcount reduction?

A source close to Toyota said that the automaker is concerned with its headcount, which has been described as “overstaffed” by as much as one-third, especially in the expensive upper-management ranks. By relocating some operations, Toyota might be banking on many employees not making the move, a much easier way of thinning headcount than by layoffs, the Toyota insider said.

A source within the automaker said Toyota has huge numbers of employees with more than 10 years’ tenure at the company, and because of relatively low turnover, has overstaffed its well-paid middle-management ranks.

The automaker has numerous upper-level managers who have steadily progressed through the company, accumulating promotions every several years. But without the traditional turnover of many companies, Toyota has become top-heavy. The source close to Toyota said the company has been studying inserting additional layers of titles, such as between “national manager” and “corporate manager.”

“We are a victim of our own success,” said a Toyota employee familiar with the plans.

A Toyota official disputed the notion that the move was aimed at trimming headcount, adding that Toyota is actually looking at a new stage of growth in North America, which likely will require additional headcount.

Exodus from L.A.

The move marks a continuing exodus of major automakers’ operations from Southern California. After nearly 50 years as Toyota’s neighbor down the street in Gardena, Nissan took 1,300 jobs to Nashville when it moved eight years ago. As much as $197 million in relocation assistance from Tennessee helped pave the way.

Ford Motor Co. moved U.S. operations for its Premier Automotive Group of brands -- Volvo, Jaguar, Land Rover and Aston Martin -- to Irvine, in south Orange County, in 2001.

But when Ford unloaded those brands, their U.S. operations returned back to New Jersey. The sales operations of American Isuzu closed in 2009, while American Suzuki left the U.S. market after its auto unit filed for bankruptcy protection in 2012.

Late last year, American Honda spawned talk of a company-wide move to Ohio when it restructured some of its core functions closer to its engineering and manufacturing base in that state.

The new Honda organization combined information systems, human resources, accounting, finance and other functions across to multiple Honda companies in North America into a firm called Honda North America Services.

The new organization also will “streamline coordination of Honda's r&d, manufacturing, purchasing and sales functions as they relate to the introduction of new products,” the company said in a statement at the time. Honda officials insisted that the move was not part of a larger framework to uproot the entire U.S. operations to Ohio.

After Nissan left Los Angeles, Toyota top executives insisted they would never leave the city.